Green Buildings Earn Higher Rents, Study Finds

Green Buildings Earn Higher Rents, Study Finds

A clear link between buildings boasting a high Energy Star rating and those commanding high rental premiums has been revealed by a new study of US commercial properties.

The study, commissioned by the Royal Institution of Chartered Surveyors (RICS) and carried out by researchers from Maastricht University and the University of California, Berkeley, is thought to be the first to confirm the case for landlords making their properties more energy efficient.

The survey of almost 900 buildings found that buildings with an Energy Star certificate attracted rental premiums of three per cent per sq ft compared with "non-green buildings" of the same size, location and function.

When rental concessions were removed from the equation the premium was higher still with Energy Star buildings attracting a premium of over six per cent.

In addition, green buildings were even more attractive to buyers, securing a premium of around 16 per cent when sold. The researchers calculated that the sale premium meant that improving the energy efficiency of the average non-green building would increase its capital value by $5.5m (£3.8m).

Simon Rubinsohn, chief economist at the RICS, said that the research should help strengthen the case for green building upgrades.

"Previously with only anecdotal evidence available, it is understandable that the uptake of some measures has been frustratingly slow," he said. "With more comprehensive evidence-based research, such as this paper, the economic argument for having an energy efficient building will be strong."

The correlation between green buildings and higher rents is also likely to strengthen, according to John Alker of the U.K.'s Green Building Council. "As an industry we have not been providing energy efficiency ratings for that long, so it is understandable that evidence of rental premiums has been a bit patchy up to now," he said. "But that is changing and as more companies understand that they will be operating in a carbon constrained world with a price on emissions that will translate into low carbon buildings having higher valuations."

[You can download the report, "Doing Well by Doing Good? An analysis of the financial performance of green office buildings in the USA," from GreenerBuildings.com.]